Prosper: Skip the late fee, straight to collections?

[azdude480]

I have heard a lot about P2P companies (or at least companies that began as P2P) like Upstart, Upgrade, Prosper, and LendingClub. I've actually used  Upstart recently for a small loan to pay off revolving debt for my fiancee when we needed to get her credit score up posthaste. I'm curious about maybe coming at it from another angle and looking at how being an investor works. 

In my research, I stumbled across this on Prosper's website. Maybe I'm not reading or understanding this correctly, but it sounds like you have 15 days beyond the due date on a loan to pay the payment. OR--instead--they can simply send you to collections after 1 day? 

Seems a bit confusing. But if I'm right, has anyone heard of anyone actually being sent to collections with any of these companies for being more than a day late? 

Just curious as to if I'm missing anything and if anyone around these parts has had one of these companies utilize (what appears to be) the latter, harsher option.

[OmarGB9]

Not sure if they ever exercise that right, but I had an Upstart loan that went south, and it didn't go to collections right away. Not until it was COd.

[azdude480]

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@OmarGB9 wrote:

Not sure if they ever exercise that right, but I had an Upstart loan that went south, and it didn't go to collections right away. Not until it was COd.

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Ouch! But as a random aside--congrats on the rebuilding progress and recent PenFed card! Rapidly approaching +200pts per bureau! 

Yeah it seems like it would be a poor business decision. If someone is a day late (which in my opinion is still pretty bad barring natural disasters or major life/events tragedies throwing them off), I feel like them waking up and seeing their credit shot to hell with a new collections account would make them very inclined to let the debt sit there until the collections fall off. Plus they probably wouldn't be inclined to ever consider the company or recommend them again. Meh.

[Jnbmom]

Ouch wouldn't want to default or even be late with them .

now I realize prosper is funded by investors so I would think they would be much quicker with late accounts then your normal type of lenders  , but darn that is really quick .

[azdude480]

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@Jnbmom wrote:

Ouch wouldn't want to default or even be late with them .

now I realize prosper is funded by investors so I would think they would be much quicker with late accounts then your normal type of lenders  , but darn that is really quick .

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Yeah it's really, really fast. "Take out a loan with us, but no tomfoolery allowed here. You miss the time cutoff on the day the payment is due, potentially kiss your credit GOODBYE for the next 7 years.

I'm curious if it's a typo and they mean to basically say "up to 15 days late is a late fee, one month late is collections". And that's true that they may want to be less lenient with investors. Investors get money distributed for each late fee that is collected, as the site says,  but not sure if that distribution would ever make up for the risk of default if borrowers need to be that late on a loan payment. 

[Anonymalous]

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@azdude480 wrote:

I'm curious if it's a typo and they mean to basically say "up to 15 days late is a late fee, one month late is collections". And that's true that they may want to be less lenient with investors. Investors get money distributed for each late fee that is collected, as the site says,  but not sure if that distribution would ever make up for the risk of default if borrowers need to be that late on a loan payment. 

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It has to be a typo. It makes no sense to say in 1 day, we'll sell it to a collection agency. But 14 days after that, we'll charge you a late fee. But it's probably legally binding, so I wouldn't sign an agreement with them.